The Impact of Emu on the Equity Cost of Capital

40 Pages Posted: 15 Dec 2006

See all articles by Richard Priestley

Richard Priestley

Norwegian Business School

Dimitrios Malliaropulos

University of Piraeus - Department of Banking and Financial Management; National Bank of Greece

Gikas A. Hardouvelis

University of Piraeus; Centre for Economic Policy Research (CEPR)

Abstract

This paper shows that during the 1990s the process of gradual economic and monetary integration, which eventually led to EMU, also resulted in a reduction in the equity cost of capital. A similar reduction was not present in the three EU countries which chose not to enter the Eurozone. There was also a strong convergence in the cost of equity across the different countries within a given industrial sector, but little convergence across the different sectors of a given EMU country. An implication for portfolio management is that country effects are becoming less important and sectoral effects are becoming more important.

Keywords: Asset Allocation, Convergence, Cost of Equity, EMU, Industrial Sectors, Integration

JEL Classification: G12, G15, G11

Suggested Citation

Priestley, Richard and Malliaropulos, Dimitrios and Hardouvelis, Gikas A., The Impact of Emu on the Equity Cost of Capital. Journal of International Money and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=951909

Richard Priestley (Contact Author)

Norwegian Business School ( email )

Nydalsveien
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N-0442 Oslo, 0283
Norway
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Dimitrios Malliaropulos

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
(+30) 210 3341527 (Phone)
(+30) 210 3341702 (Fax)

National Bank of Greece ( email )

86 Eolou Str.
10232 Athens
Greece
+30 1 3251133 (Fax)

Gikas A. Hardouvelis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
+32010 4142323 (Phone)
+3210 6724848 (Fax)

HOME PAGE: http://www.eurobank.gr

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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